- Tyson Foods reported first-quarter net income of $1.63 billion compared to $593 million during the same period a year ago. AdvancePierre contributed approximately $325 million of revenue in the first quarter of fiscal 2018. Overall, sales at Tyson rose 11% to $10.2 billion, beating analysts' estimates of $9.87 billion.
- The 2018 outlook is for an increase of between 6% to 7% to $41 billion due to an increase in sales from AdvancePierre, a boost in sales volume in its legacy businesses and an improvement in mix, predominantly in the company's chicken segment.
During the period, Tyson Foods said recent tax changes improved its bottom line by $790 million.The Arkansas-based company also announced it would spend the more than $300 million it expects from this year's corporate tax cut on one-time bonuses, investment in employee training and education, and accelerating capital projects — including sustainability and animal well-being initiatives. Employee bonuses, which will be more than $100 million, will be paid out during the second quarter, Tyson said.
Tyson's first-quarter results reflect the ongoing consumer demand for chicken, pork, beef and prepared foods. The latter posted a 20.9% boost in revenue to $2.29 billion, chicken sales jumped 11% to $3 billion and beef rose 10.1% to $3.9 billion. Pork sales surged 2.5% to $1.3 billion, although pork volumes dropped by 2.6% during the quarter, which the company said resulted from balancing its supply with customer demand while margins are compressing.
"Building on our momentum from a record year in fiscal ’17, we’re off to a strong start in fiscal ’18," Tom Hayes, Tyson president and CEO, said in a release. "We drove solid results in each of our segments — beef, pork, chicken and prepared foods. We grew topline sales, with our retail and food service sales both outpacing the industry. We’re encouraged by the position we’re in today."
Tyson Foods sees demand for its products unlikely to wane anytime soon. It increased its fiscal 2018 forecast to between $6.55 and $6.70 from a prior forecast of between $5.70 and $5.85, with some of the increase coming from a lower tax rate.
Tyson's beef sales increased due to greater supply, stronger demand and higher exports, although labor and freight costs also were up, the company said. According to government estimates, U.S. beef and poultry consumption is expected to hit record levels this year, while cattle herds are expanding because of cheaper grain costs.
In its chicken segment, strong demand drove increased sales volumes, while the company also benefited from $14 million in cost savings from its Financial Fitness Program, along with somewhat lower feed expenses.
Since Hayes became CEO about a year ago, he has moved toward expanding and diversifying the company's portfolio. He has overseen the acquisition and integration of AdvancePierre, a maker of ready-to-eat sandwiches and snacks, and he announced last fall that Tyson would buy Original Philly Holdings, a maker of raw and fully-cooked Philly-style sandwich steak and cheesesteak appetizer products.
Hayes recently indicated the company is looking for further deals if the price is right.
Tyson needs to “continue to be in growth mode because so many companies are not growing. Food companies are really starved for growth, so they have had to cut costs to the point that that is the only way to make money,” Hayes told Food Dive last October. “We want to certainly be able to have the right cost structure but the future will be really focusing on growing our brands, our customer brands, and being that company that people look to and say, 'They are an ongoing, growing food company.'”
Meanwhile, Tyson's VC arm, Tyson Ventures, is making forays into some unexpected places. It recently bought a minority interest in Memphis Meats, a cultured meat startup based in San Francisco, and just announced this week that it was investing in Tovala, a startup that produces steam ovens and ready-to-cook food.
This latest earnings report reveals a company well-positioned to show strong results since consumer demand for its products remains high. Hayes remains committed to growing and diversifying wherever prudent opportunities exist.